A new survey from LendingTree shows that a majority of small businesses who apply for loans don’t take time to shop around.
The data shows that of those seeking small business loans within the past year, 58 percent of the 170 U.S. small business owners did not compare loan options during the application process. Furthermore, 61 percent said they went straight to a bank or credit union to determine what options they had for financing and funding options.
According to LendingTree, this might mean those SMBs are missing out on potential savings.
“Many assume that the bank or lender they work with will always give them the best rate, and while that may be the case sometimes, it doesn’t hurt to see what options are available. Lenders compete with one another to earn trust and earn market share by offering better rates, terms and service just like any other business,” said Doug Lebda, CEO of LendingTree. “The LendingTree loan marketplace offers a way for business owners to compare loans from multiple banks and lenders, including alternative lenders, with only one application, for less time than it would take to go the bank.”
In that same survey, it showed that many small businesses indicated that they have had trouble finding financing, but only about 24 percent of those small business owners took the effort to go online to researching funding options.
“There is just a tremendous amount of investment and innovation in serving this sort of non-bank or sort of beyond the traditional credit models, and business models, and capital structures that existed in the past,”Jim Salters, CEO of The Business Backer, said. “So we’re seeing a lot of non-bank companies that are seeing increasing amounts of investment from venture capital, private equity and lending capital funds. This investment and innovation is increasing available funding supply.”
In the LendingTree survey, the small business owners also revealed some key stats about their struggles to obtain a small business loan. The top three issues include:
- 22 percent: Gathering required documentation
- 20 percent: Long application process
- 16 percent: Speed of approval
As for decisions that played a role in why the business owner chose a specific lender, the results showed:
- 51 percent: Established trust with the lender
- 9 percent: value brand recognition/reputation of the lender
- 30 percent: Ease/convenience of application
- 27 percent: Interest rate and costs
Finally, the survey also revealed how much small businesses are borrowing and what purpose they are borrowing for:
- 18 percent: Seeking loans of less than $10,000
- 36 percent: Seeking loans between $10,000 and $50,000
- 22 percent: Applications for a new business
- 33 percent: Working capital (cash-flow, day-to-day ops, payroll, etc.)
- 20 percent: Purchase or lease equipment
- 17 percent: Debt consolidation/relieve existing debt
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